A cynical commentary about developments in the South African financial markets and the incomprehensible activities and pronouncements of bureaucrats and politicians.

Friday, 6 January 2017

HAPPY NEW YEAR

Number One spent
a very happy festive season in his Zululand home. There were several occasions
when he and his mates were able to don the pelts of endangered species and
dance the night away. Even his ex-wife pitched up in the province to make a pointless
speech about her current job in Addis Ababa. And undoubtedly, she popped round
for a chat with JZ to discuss the idea of a dynastic presidential succession.
An unappealing idea for the rest of us.

About the
only steady number in the markets at the moment is the demand for US dollars.
Owning a few of those appears to be preferable to just about everything else.
Even the mysterious Bitcoin which enjoyed a great 2016 has been hammered in the
early days of the new year. Puzzled investors (i.e. all of us) can choose from
the complete range of available forecasts being confidently issued by the seemingly
omniscient. Bull or bear? You choose.

Matric
results season is a good time for newspapers. They can fill acres of space with
pictures of high achieving candidates, jaw-flapping politicians and in some
cases, both together. Although how they persuade the ex-pupils to get dolled up
in their school kit again is a mystery. Then there are the words. Words of
congratulation, commiseration and platitudes and clichés. In what even one
youth group so correctly derided as fruitless expenditure our local municipality
paid for an all-night “vigil to pray for positive matric results”. Way too late
perhaps? But the real story lies in the dozens of pages of individual grades which
starkly highlights the irrelevancy of fussing about mark adjustment and pass
rate percentages. More than 150 000 candidates have been told that they
are good enough to enter a degree course at a university. This is manifestly false
and callous. For most of them the truth will be very different.

In fact,
these enormous numbers also reveal that our national model of making a single
minister of education responsible for so many “customers” is doomed to fail. Even
splitting by province is no help. Here in KZN more than 1700 schools entered pupils
for the school leaving exam and 12% of them had fewer than 10 candidates. Even
the most competent CEO on the planet can’t manage that kind of client base, so
it is unsurprising the business fails to succeed. It is a big and difficult mess
to clean up especially given that many parents are content to pass the buck for
educating their offspring onto someone else.

So Exxaro,
the listed mining company that supplies a great deal of the coal that Eskom
burns to provide our electricity, seems to have become fed up with the
government’s efforts to impose a politically based system of asset allocation.
Dressed up in a melee of Bs and Es and other jargon the policy seems to promise
that ownership is a guaranteed route to wealth. This is not truthful. Only a few
enterprises make sufficient money to cover all their costs and then still provide
enormous income for the owners. While being a shareholder sounds all
sophisticated and clever it may take many years before the flow of profits
covers the cost of the shareholding. It does of course help enormously if that
cost is paid by someone else – a feature of many of these schemes – but a
listing on the JSE for many firms is largely about acquiring a list of people
to approach next time you need some cash. The JSE’s mining sector – a particular
target of the state for these “transformation” deals – has failed to deliver any
return for an investor who has toughed it out for the past 10 years. Individual
companies have of course soared and crashed over shorter time scales and there
will be smug speculators amongst us but overall it has been a poor industry in
which to grow rich as an owner.

National
selectors have a hard enough job in picking the best on form sportsmen (and
presumably women) for the national sides. Understandably the athletes choose to
go where their medium and long term benefits are best. Undeniably it is hard to
match overseas salaries. But if the guy is eligible and keen to play why is the
task made more complicated by the various rules and regulations because of those
choices? Sad and frustrating. Just what
is Kolpak anyway?